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105 Pages·2009·0.43 MB·French

Doing business in France

1 PKF – Doing Business in France
Important disclaimer

PKF Ampersand, PKF Cogeparc, PKF Gross Hugel and PKF Audit Conseil are member firms of the
PKF International Limited network of legally independent firms and does not accept any
responsibility or liability for the actions or inactions on the part
of any other individual member firm or firms.
No person should act or rely upon any matter on information contained in or implied in this
publication without first obtaining advice from a qualified adviser that relates specifically to their
particular circumstances.
This publication should not be regarded as offering a complete explanation of the taxation matters
referred to. The publishers and the authors are not responsible for the results either of any actions
taken on the basis of information in this publication, nor for any error in or omission from this
publication. The publishers and the authors expressly disclaim all and any liability and responsibility
to any person, who acts or fails to act as a consequence of reliance upon the whole or any part of
the contents of this publication.

Preface

We all commit to provide our clients with a consistent quality of service, which means that no matter
how small your business or individual needs might be, your affairs are personally overseen by a
partner. In practice, this means that your partner will ensure that you are provided with the right skills
to help you operate more profitably and tax effectively. You will be given a commitment to provide
you with timely, expert advice. As a result of understanding your needs, your partner will be able to
take the initiative and offer pro-active advice.
© PKF. All rights reserved. 2009
2 PKF – Doing Business in France
Content

Content 3 
Introduction 9 
• Geography 9 
• Advantages of Investing in France 9 
• Constitution 10 
• Economy 11 
• Communications 11 
• Language and Currency 12 
• Legal System 12 
• Major Export & Imports 12 
• Government Policy on Foreign Investment 13 
• Import Controls 14 
• Source of Finance 14 
• Exchange Control 14 
• French Business Number 15 
Business Structures 17 
• Types of Business Structures 17 
• Branch or Agency 17 
• Company 18 
• Forming a Company 19 
• Legal and Accounting Regulations 21 
• Audit Requirements and Practices 21 
• Shareholdings by Non Residents 21 
• Partnerships 21 
• Joint Ventures 22 
• Trusts 22 
Regulatory Framework 23 
• Financial Services 23 
PKF – Doing Business in France Contents 3
• Money Laundering 24 
• Data Protection 25 
• Health and Safety 25 
• Competition 26 
Business Finance 27 
• Equity Finance 27 
- Business angels 27 
- Private equity 27 
- Listing 28 
• Loan Funding 28 
- Overdraft 28 
- Term loans 29 
- Other loans 29 
- Factoring and discounting 29 
Taxation 31 
• Introduction 31 
• Fiscal Year 31 
• Taxpayers 31 
• Payment of Tax 32 
• Lodgement of Returns 32 
• Interaction with International Tax Regime 32 
- Tax treaties 32 
- Tax haven 33 
• Taxation of Companies 33 
- Taxable incomes 34 
- Income tax rate 34 
- Branch profits tax 37 
- Interest deductions 38 
- Taxation of capital gains 38 
- Repatriation of profit and transfer pricing 39 
- Inventory valuation 40 
- Depreciation 40 
4 PKF – Doing Business in France Contents
- Timing differences 41 
- Income from entities not subject to company tax 41 
- Regional development 41 
- Disallowable items 42 
• Taxation of Individuals 43 
- Income tax 43 
- Wealth tax 45 
- Tax shield (bouclier fiscal) 46 
- Succession duties 46 
• Sales Tax/Value Added Tax (VAT) 47 
- Activities subject to or exempt from VAT 47 
- Territoriality 47 
- VAT rates 49 
- Recovery of VAT input 50 
• Payroll taxes 51 
• Other taxes 53 
- Fringe benefits tax (FBT) 53 
- Local taxes 53 
- Company car tax 53 
- Salary tax 53 
- Organic tax 54 
- Rates of stamp or transfer duties 54 
- Customs duties 54 
• Payroll Taxes 54 
Grants and incentives 57 
• Tax Concessions 57 
• Regional Incentives 57 
- Regions affected 57 
- Eligibility 58 
- Tax incentives 58 
- Non-tax incentives 58 
• Industry Incentives 59 
• Export Incentives 59 
PKF – Doing Business in France Contents 5
• Tariffs Payments 59 
• Tax Incentives for Investors 60 
- R&D tax credit 60 
- Family tax 61 
- Cinema, television and media tax credit 61 
• Temporary Business Tax Exemption 62 
• Temporary Corporate Income Tax Exemption 62 
- New companies 62 
- Innovative new companies (JEI) 63 
- "One-man" venture capital company (SUIR) 64 
Intellectual and Industrial Property 65 
• Copyright 65 
• Trade Marks and Trade names 66 
• Patents 66 
Immigration 67 
• Permanent and Temporary Residence 67 
- Skills and talents permit 68 
- Salaried and temporary worker permit 68 
- Employee on assignment permit 68 
- Employee on assignment card 69 
- Seasonal worker permit 69 
- Scientific permit 69 
Employment in France 71 
• Employees' Rights 71 
Selling into France 75 
• Direct Selling From Abroad 75 
- Taxation issues 75 
- Legal and contractual issues 76 
• Selling into France through a French-based Agent 76 
- Taxation issues 76 
6 PKF – Doing Business in France Contents
- Legal and contractual issues 77 
• Selling into France through a French-based Distributor 78 
- Taxation issues 78 
- Legal and contractual issues 78 
Place of business 81 
• "Place of business" in France 81 
• Operating a Branch in France 82 
• Operating through a French Company 83 
- Taxation of French companies 83 
- VAT and customs 84 
- Transfer pricing and associated entities 85 
E-business 87 
• Business Issues 87 
• VAT Issues 87 
• Direct Tax Issues 88 
Ceasing to have a presence in France 91 
• Disposal of a Business or Subsidiary 91 
• Tax Considerations on Disposal of a Business 91 
• Legal and Commercial Considerations on the Disposal
of a Business 91 
• Dissolution & Liquidation of Companies 92 
Appendix 93 

PKF – Doing Business in France Contents 7
8 PKF – Doing Business in France Contents
Introduction
Geography
France has a total surface area of 633,000 sq km (244,000 sq mi) —
metropolitan France covers 544,000 sq km (210,000 sq mi), which
makes it the largest country in Western Europe, almost one fifth of
the total area of the European Union, with a vast maritime zone,
between the North and the South of Europe.
Metropolitan France is bordered (clockwise from the north) by
Belgium, Luxembourg, Germany, Switzerland, Italy, Monaco,
Andorra, and Spain.
In addition to its 96 metropolitan departments, France includes a
number of outposts and islands scattered all over the world (West
Indies, Indian Ocean, South America, and Pacific). These overseas
departments (DOM) and collectivities (TOM) are a legacy of its
colonial past and of the journeys made by French explorers.
With 63.8 million inhabitants as of January 2008, France ranks
second among the most populated countries in Europe.
Advantages of Investing in France
Top tourist destination on the planet, France ranks second
worldwide for direct inward investment. Investing in France has
several advantages. Foreign investors appreciate the skills of
French workers, the advanced level of research, the mastery of high
technology, the stable currency (euro) and control of production
costs.
France has high-quality higher education (universities and
prestigious graduate institutions). Technicians, supervisors,
engineers, managers and civil servants all benefit from excellent
training. The country comes third in the percentage of those
aged 20-24 in full-time education, and second in the level of
qualification of its labor force and the percentage of those aged 20-
29 with degrees in science and technology.
PKF – Doing Business in France Introduction 9
By devoting 2.2% of its Gross Domestic Product (GDP) to research,
France occupies a select place in the leading group of countries
producing knowledge and innovation. It has a multitude of highly
reputed research centers as the national institute of agronomic
research (INRA), the national institute of health and medical
research (INSERM) and the institute of Earth Physics. With 12,000
research workers, the national centre for scientific research (CNRS)
is the biggest research body in Europe.
France is going to increase public and private spending on research
by 70%, raising it from 2.2% of GDP to 3% by 2010. This
intellectual "hitting power" has been behind some great
technological ventures, like the Ariane rocket, the Airbus and the
high speed train (TGV - HST).
France is pulling itself up into first place among leading countries in
terms of hourly productivity. It also has one of the lowest rates of
absenteeism in the world. Contrary to all too oft-repeated clichés,
France is not paralyzed by strikes and social unrest.
As for energy costs, these are ahead of the European average. On
the telephony front, mobile and broadband coverage reach the
whole country, including rural areas.
France has also introduced special taxation and financial incentives
to encourage multinational companies to establish their regional
headquarters in France.
Investment in France is a reliable entry point for investments in the
European region.
Constitution
France is a republic that ruled by the 1958 Constitution. This
Constitution limits the power of Parliament and makes the President
a powerful executive.
The Head of State is the President of the Republic. He is elected for
10 PKF – Doing Business in France Introduction